# TAT A ENGINEERING AND LOCOMOTIVE COMPANY LTD. AND ANR v. MUNICIPAL CORPORATION OF THE CITY OF THANE AND ORS

- **Citation:** [1991] Supp. 2 S.C.R. 445
- **Court:** Supreme Court of India
- **Decided:** 1991-11-22
- **Case number:** Civil Appeal No. 4702 of 1991
- **Bench:** A.M. Ahmadi, V. Ramaswami, K. Ramaswamy
- **Source:** https://unisonlegal.in/judgment/supreme-court-of-india/tat-a-engineering-and-locomotive-company-ltd-and-anr-v-municipal-corporation-of-11437
- **Pages:** 33

## Headnote

Maharashtra Municipalities (Octroi) Rule, 1968:
Rule 25 (3) (d)-Octroi--Levy of-Goods imported within municipal limits and stored in Warehouse for temporary detention and eventual exports-Goods sold within municipal limits for export and consumption outside municipal limits--Held octroi not leviable-Taxable event of
octroi-What is.
Rules 28,29 and 3~ctroi~efund of-Non-compliance with
procedure-Effect of-Compliance with procedure not a condition precedent for eligibility of refund-Compliance with procedure shall be tested
having regard to the nature of transaction and the object of procedure.
A
B
c
D
Doctrine of unjust enrichment-No evidence to suggest that octroi E
levied was recovered from customers-Refund of octroi would not lead-to..
unjust enrichment.
Rule 24-0ctroi-"Breaking the bulk"-Procedure to be
followed-Rule 24 held not inconsistent with Rule 62 of Chapter VIII of
the schedule to the Bombay Provincial Municipal Corporation Act,
F
1949-0bject of Rule 24(2) explained.
Rule 28(2) (b)-Refund of octroi-Requirements of-Requirement
of exporting goods out of municipal limits within six months of importProof of-Equitable principle ''first export was of goods first
imported"-Applicability of
G
The appellant-company was carrying on business of manufacture and sale d motor vehicles, spare parts of motor vehicles and
excavators. Their manufacturing units we.re located outside the municipal limits of the respondent corporation. P~rsuant to the permission granted by the Respondent Corporation under Rule 10(2) of H
445
446
SUPREME COURT REPORTS
[1991] SUPP. 2 S.C.R.
A
the Maharashtra Municipalities (Octroi) Rules, 19.68 the appellant
company was maintaining a bonded warehouse within the municipal
limits of the Respondent-Corporation. The motor vehicles parts and
excavators parts brought from the Company's own factories as well
parts imported from abroad were stored in this warehouse. These
products were brought in bulk and thereafter taken or sent out
B
from the Municipal limits in smaller packings depending on the
requireinents of the customers in various parts of the country.
The appellants were also granted current account facilities without
the requirement of immediate payment of octroi at the Octroi Naka.
Accordingly, the appeliants were carrying out their activities of imC
ports and exports under the current account procedure with facility
of unpacking the bulk, repacking and exporting.
D
E
F
Under the Octroi Rules the octroi becomes refundable when
the goods in respect of which octroi. was paid are exported out of
octroi limits within 6 months of their import. During the period 1st
January, 1983 to 31st March, 1984 the appellant-Company made
1182 claims for refund of octroi which were rejected by the Corporation on the grounds: (1) the Co~pany had "sold" the spare parts
within the octroi limits of the Corporation in contravention of Rule
25(3) (d) of the Maharashtra Municipalities (Octroi) Rules, 1968;
(2) the procedure prescribed for export and the claim of refund had
not been strictly followed.
The appellants filed a writ petition under Article 226 in the
High Court of Bombay contending that the action of the Municipal
Corporation in refusing refund was unc,mstitutional and illegal. The
Division Bench of the High Court dismissed the writ petition. The
Company filed an appeal in this Court· against the decision of the
High Court.
In appeal to this Court it was contended on behalf of the appellant (i) since the sales were not for consumption or use within the
octroi limits and that the parts were sold to parties outside the
G
octroi limits and also for consumption or use o_utside such limits the
rejection of the claims by the Respondent-COiporation on the ground
that the sales were within the municipal limits in contravention of
rule 25(3) (d) of the Rules is illegal; (ii) Under Rule 62 of Chapter
VIII of the Schedule to Bombay Provincial Municipal Corporation
Act, 1949, prior intimation of the intention to 'break the bulk'

## Text

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TAT A ENGINEERING AND LOCOMOTIVE
COMPANY LTD. AND ANR.
v.
MUNICIPAL CORPORATION OF
THE CITY OF THANE AND ORS.
NOVEMBER 22, 1991
[A.M. AHMADI, V. RAMASWAMI AND K. RAMASWAMY, JJ.J
Maharashtra Municipalities (Octroi) Rule, 1968:
Rule 25 (3) (d)-Octroi--Levy of-Goods imported within municipal limits and stored in Warehouse for temporary detention and eventual exports-Goods sold within municipal limits for export and consumption outside municipal limits--Held octroi not leviable-Taxable event of
octroi-What is.
Rules 28,29 and 3~ctroi~efund of-Non-compliance with
procedure-Effect of-Compliance with procedure not a condition precedent for eligibility of refund-Compliance with procedure shall be tested
having regard to the nature of transaction and the object of procedure.
A
B
c
D
Doctrine of unjust enrichment-No evidence to suggest that octroi E
levied was recovered from customers-Refund of octroi would not lead-to..
unjust enrichment.
Rule 24-0ctroi-"Breaking the bulk"-Procedure to be
followed-Rule 24 held not inconsistent with Rule 62 of Chapter VIII of
the schedule to the Bombay Provincial Municipal Corporation Act,
F
1949-0bject of Rule 24(2) explained.
Rule 28(2) (b)-Refund of octroi-Requirements of-Requirement
of exporting goods out of municipal limits within six months of importProof of-Equitable principle ''first export was of goods first
imported"-Applicability of
G
The appellant-company was carrying on business of manufacture and sale d motor vehicles, spare parts of motor vehicles and
excavators. Their manufacturing units we.re located outside the municipal limits of the respondent corporation. P~rsuant to the permission granted by the Respondent Corporation under Rule 10(2) of H
445
446
SUPREME COURT REPORTS
[1991] SUPP. 2 S.C.R.
A
the Maharashtra Municipalities (Octroi) Rules, 19.68 the appellant
company was maintaining a bonded warehouse within the municipal
limits of the Respondent-Corporation. The motor vehicles parts and
excavators parts brought from the Company's own factories as well
parts imported from abroad were stored in this warehouse. These
products were brought in bulk and thereafter taken or sent out
B
from the Municipal limits in smaller packings depending on the
requireinents of the customers in various parts of the country.
The appellants were also granted current account facilities without
the requirement of immediate payment of octroi at the Octroi Naka.
Accordingly, the appeliants were carrying out their activities of imC
ports and exports under the current account procedure with facility
of unpacking the bulk, repacking and exporting.
D
E
F
Under the Octroi Rules the octroi becomes refundable when
the goods in respect of which octroi. was paid are exported out of
octroi limits within 6 months of their import. During the period 1st
January, 1983 to 31st March, 1984 the appellant-Company made
1182 claims for refund of octroi which were rejected by the Corporation on the grounds: (1) the Co~pany had "sold" the spare parts
within the octroi limits of the Corporation in contravention of Rule
25(3) (d) of the Maharashtra Municipalities (Octroi) Rules, 1968;
(2) the procedure prescribed for export and the claim of refund had
not been strictly followed.
The appellants filed a writ petition under Article 226 in the
High Court of Bombay contending that the action of the Municipal
Corporation in refusing refund was unc,mstitutional and illegal. The
Division Bench of the High Court dismissed the writ petition. The
Company filed an appeal in this Court· against the decision of the
High Court.
In appeal to this Court it was contended on behalf of the appellant (i) since the sales were not for consumption or use within the
octroi limits and that the parts were sold to parties outside the
G
octroi limits and also for consumption or use o_utside such limits the
rejection of the claims by the Respondent-COiporation on the ground
that the sales were within the municipal limits in contravention of
rule 25(3) (d) of the Rules is illegal; (ii) Under Rule 62 of Chapter
VIII of the Schedule to Bombay Provincial Municipal Corporation
Act, 1949, prior intimation of the intention to 'break the bulk' is
H enough and there is no necessity for the company to get the sanction
-
-
TATA ENGINEERING CO. v.
MUNICIPAL CORPN.
447
of Superintendent ofOctroi or break the bulk in the presence of an · A
officer deputed for the purpose as required under sub-rule (2) of·
Rule 24 of the Maharashtra Municipalities (Octroi) Rules, 1968;
Rule 24(2) of the Octroi Rules is inconsistent with Rule 62 and to
the extent of inconsistency it shall be deemed to be not applicable.
On behalf of the respondent Corporation it was contended (i) . B
that the meaning of words "sales therein" in the definition of octroi
in the Acts and in Entry 52 of List II of VII Schedule to the Constitution could not be limited to sales of the goods tor purposes of
consumption or use within the municipal limits; (ii) there was a
change in the ownership of the goods since a sale in law had taken
inside the octroi limits though the purchaser was residing and carC
rying on business outside the octroi limits and under the sale the
goods were intended to be and in fact exported for the purpose of
consumption and use outside the octroi limits; (iii) that while Rule
62 (c) deals with prior intimation Rule 24(2) deals with the sanction
and breaking of the bulk in the presence of an officer deputed for
that purpose and both the rules can stay together and operate and D
there is no inconsistency; (iv) since the appellants have recovered
the amounts paid by them by way of octroi duty from their dealers
or customers they are not entitled to refund; ordering of refund
would amount to allowing the appellants to unjustly enrich themselves at the cost of the public to whom the burden had already
been passed.
E
Allowing the appeal, this Court,
l:IELD: 1. In the case of impost of oct~oi the taxable event is
the entry of goods which are meant to reach an ultimate user or
consumer in the area. Mere physical entry into the octroi limits
would not attract levy of ocfroi. When the goods are brought in not F
for consumption within the area but for temporary detention and
eventual export, octroi is n·ot leviable. The octroiable event in such
a case shall be deemed not to have happened. This is particularly so
because in the case of goods not consumed or used within the actroi
area but exported there is a constitutional bar- for the levy of octroi.
In view of the constitutional bar, octroi is not leviable if the goods
G
are not brought into the octroi area for purposes of consumption or
use in the area but for export and in fact exported by the importer
himself or the sale by him occasions the export. [458-B-C, 472 H,
473-A, 475-EJ
1.1 Having regard to the nature and incidence of octroi unless H
the octroiable goods are consumed or used or are meant to reach an
A
B
448
SUPREME COURT REPORTS
[1991) SUPP. 2 S.C.R.
ultimate user o·r consumer in the octroi area no octroi. is leviable.
The words 'sale therein' in the words 'consumption, use or sale
therein' in the definition octroi means sale of octroiable goods to a
person for the purpose of consumption or use by such person in the
octroi area. If sale was intended for consumption or use in the
octroi area whether the purchaser actually consumed inside or outside octroi area is irrelevant. Therefore octroi rules cannot be read
as enabling the municipality to levy and collect octroi even in cases
where the goods have not been imported for consumption or use.
[475-C, 474-B]
Burmah Shell Co. v. Belgaum Municipal, (1963] Suppl. 2 S.C.R.
C
216; Hira Lal Thakur Lal Dalal v. Brash Broach Municipality, (1976)
Suppl. SCR 82; Municipal Council of Jodhpur v. Parekh Automobiles
Ltd. & Ors., {1999) l S.C.C. 367 and H.M.M. Ltd. v. Administrator,
(1989] 4 S.C.C. 640, relied on.
Khandelwal Traders Ako/a v. The Ako/a Municipal Council, AIR
D
1985 Bom. 218, approved.
E
F
G
1.2 Since the goods were sold by the Company to outside purchasers and the goods under the transactions of sale were intended
to be exported and were in fact exported, for consumption or use
outside the municipal limits no octroi duty was leviable and the
octroi duty paid on entry into the municipal limits was, therefore,
liable to be refunded. Accordingly the rejection of the refund claims
on the ground that Rule 25(3) (d) had not been strictly complied
with is iilegal and could not be sustained. [457 G-H]
2. Once octroi is not leviable the deposit made by the importer pending export is in the nature of a trust and refund!lble in
the event of the export of the goods. [473-G-H]
·
· 2.1 Under the octroi scheme, when the goods in respect of
which octroi is paid are exported, the octroi becomes refundable.
Right to refund arises because the goods are not consumed inside
the area but exported and the .tax becomes not leviable. (458-C)
2.2 If there is no consumption or use, octroi is not attracted
and if any levy bas been made and the amount collected, the same
becomes legally refundable even when the goods are exported in
parts and in smaller packages. [472-H]
H
3. The rules mereiy regulate the system on which refund shall
...
.
~
TATA ENGINEERING CO.
v.
MUNICIPAL CORPN.
449 ·
be allowed. In a given set of facts, whether the rules have been
A
compl'ied with will have to be tested having regard to the nature of
the particular transaction and whether the object of the procedure
provided is otherwise fully satisfied. (458-D, 473 H, 474-A]
3.1 The object of requiring intimation or sanction and presence of an officer when breaking the bulk in the scheme of octroi B
levy and refund is to ensure that dutiable goods do not escape the
assessment and refunds are made only in respect of go-0ds exported.
· In other words the whole requirement relates to the identification of
the goods. In that sense if the same is otherwise complied with the
right to refund cannot be denied. [474 A-BJ
....,
c:
I
r
3.2 Rules 24 to 30 of the Maharashtra Municipalities (Octroi)
Rules, 1968 and the forms in the system of levy of Octroi are intended to regulate the procedure for collection identification of dutiable goods and correlation of goods exported with the goods imported for the purpose of refunds of octroi collected. [475-DJ
The rules do not contain any specific provision that an applicant for refund who has failed to follow the procedure would be
disentitled to claim the refund. (473-G]
D
3.3 Compliance with the procedure prescribed in the Rules for
filing claims of refunds are not conditions precedent for the right or E
eligibility for refund or the liability to refund but are provisions
regarding proof of export of the goods imported and are not meant
to be exhaustive either. They are to be interpreted and understood·
in that sense. (475 E-F)
Municipal Committee Khurari v. Dhannala/ Sethi & Ors., [1969]
F
1 S.C.R. 166; Kirpal Singh Duggal v. Municipal Board, Ghaziabad,
(1968) 3 S.C.R. 551, applied.
3.4 Since the rejection of the claims for refund was merely on
the ground that either form 4 and original invoices were not produced or columns 5 and 6 of Form 11 or the corresponding columns
G
in Form 12 had not been filled with reference to an original invoice
or Form ,4 or deposit receipt and the refusal to issue export pass
certificates on those very grounds are untenable the orders of rejection are invalid. (475 G-H]
4. The object of the Rules fixing a period of limitation for
H
450
SUPREME COURT REPORTS
[1991) SUPP. 2 S.C.R.
A
exl>ort however is different. The export cannot be put in perpetual
doubt and the goods may be considered to have come to a 1·epose if
·they were not exported within a pa~ticular period provided in the
rules. [475-F)
•
4.1 However an equitable principle could be followed in this
B
regard and it may be presumed that the goods which came in first
hav~. gone out first. If the goods are mixed up and unidentifiable
due to breaking bulk and ·repacking in smaller and assorted packages before export the principle that the first export was of the
goods first imported, subject to any evidence available to the contrary, may be applied and the six months period prescribed under
C
Rule 28(2) (b) for export may be determined accordingly. [475 A-B,
H, 476-A)
Clayton's case, 1814-23 All. E.R. 1, applied.
5. There is no inconsistency between Rule 62 and Rule 24(2).
D
The intimation contemplated in Rule 62 imply that the breaking the
bulk shall be done with the knowledge of the octroi authorities. But
it cannot be said that the rules further provide that after intimation
the breaking of the bulk shall be done in the presence of the officers
and after sanction that would in any case be inconsistent. Therefore, both the rules can stand together. [471 F-G)
'E
6. There in no evidence that any of the articles sold by the
Company is subject to any price control by the Government or that
the Company had charged any octroi separately in the bills. Documentary evidence do not also show that any octroi was separately
charged and collected by the Company. Therefore the question of
F
unjust enrichment does not arise. (476 F-H]
CIVIL APPELLATE JURISDICTION : Civil Appeal No. 4702 of
1991.
From the Judgment and Order dated 26.8.88 of the Bomaby High
G
Court in W.P. No. 2264 of 1984.
H
T. Andharujina, F.H. Talyarkha, R.F. Nariman, R. Narain, Ashok
Sagar and Ms Amrita Mitra for the Appellants.
K.K. Singhvi, B.N. Singhvi and Anil K. Gupta for the Respondents.
The Judgment of the Court was delivered by
j
TATA ENGINEERING CO. v. MUNICIPAL CORPN. [V. RAMASWAMI, J.] 451
V. RAMASW AMI, J. Leave granted.
· tje First appellant-Tata Engineering and Locomotive Company
Limited (hereinafter called the 'Company') is a company registered under
the Indian Companies Act, 1913 and the second appellant is one of its
Directors. The Company is carrying on business of manufacture and sale
A
of motor vehicles and spare parts of motor vehicles and excavators. Their B
manufacturing units are at Pune and Jamshedpur outside the Thane Municipal Corporation limits. They have a bonded warehouse within the
municipal limits in which they bring and stock motor vehicles parts· and
excavators parts from their own factories at Pune and Jamshedpur. They
also bring in parts manufactured by their ancillaries within India and also
parts imported from aboard. These products or parts are brought in bulk C
and thereafter taken or sent ·out from the. Municipal limits in smaller
packings depending on the requirements of the customers in various parts
of the country. It is stated that the parts imported or purchased from others
and brought in are relatively very small in quantity and the major portion
of the activity related to their own factory produced parts.
On and from lst October, 1982 with the notification under Section 3
of the Bombay Provincial Municipal Corporation Act, 1949, the Thane
Municipal Council became a Municipal Corporation (hereinafter called
D
the Corporation). Prior to the constitution of the Corporation it was a
municipality and were governed by the Thane Municipal Council constituted under the Maharashtra Municipality Act, 1965. Prior to 1st October,
E
1982 the Thane Municipal Council had granted to the Company current
account facilities in respect of payment of octroi under the Maharashtra
Municipalities Act, 1965 and the MaharaShtra Municipalities (Octroi) Rules,
1968 made thereunder. The Municipal Council had also granted permission under Rule 10 (2) to the Company for maintaining a godown or
warehouse of their own. Their is no dispute that even after the coming
F
into existence of the Thane Municipal Corporation the appellants were
permitted to have a war~bouse of their own and keep a current account
facility without the req\iifement of immediate payment of octroi at the
Octroi Naka. In tenns of granting those facilities the Company had made
as security a cash deposit of Rs. 7 lakhs with the Corporation and had also
given a Bank Guara.tiiee for an equiv.a'.tent amount as agreed to between
G
the Company and the. Corporatiori. However, there is some dispute as to
what were the fonnalt~ies that were dispensed with in the matter of claiming refund of the octroi when the goods were exported. But suffice it to
say at this stage that the appellants were permitted to carry out their
activities of imports and exports under the current account procedure with
a facility .~f unpacking the bulk, repacking and exporting.
H
452
SUPREME COURT REPORTS
[1991] SUPP. 2 S.C.R.
A
During the period 1st January, 1983 to 31st March, 1964 it is stated
that the appellants had made 1182 claims for refund. All these claims
were rejected by the letters of the Corporation dated 31.8.1983, 12.1.1984,
5.4.1984 and 6.4.1984. They were rejected on the following two grounds :
(I) the Company had "sold" the spare parts within the octroi limit (which
is co-terminus with the Corporation limit) in contravention of Rule 25 (3)
B
(d) of the Maharashtra Municipalities (Octroi) Rules, 1968 (hereinafter
called the "Rules"), (2) the procedure prescribed for export and the claim
of refund had not been strictly followed. The non~compliance with the
procedure prescribed referred to in the second ground according the Corporation were: (i) Form 4 of the Octroi Rules and the original invoices
were not submitted, or (ii) Forms 11 and 12 filed were incomplete and all
C
the required information were not given or (iii) certificate of the Octroi
exit Naka Officer had not been obtained. The rejection of the claim was
either on one or more than one or all the grounds mentioned above. The
appellants filed a writ petition under Article 226 in the High Court of
Judicature at Bombay contending that the action of the Municipal Corporation in refusing refund is unconstitutional ·and illegal and for certain
D
other reliefs. The Division Bench of the High Court which heard the same
dismissed the writ petition on the 26th August, 1988. It is against this
judgment that the present appeal has been filed.
E
F
G
H
It appears that during the hearing of the writ petition the learned
counsel appearing for the Corporation did not counter the contention of
the Company that the rejection under Rule 25 (3) (d) was not correct and
the learned Judges have also recorded the same in the judgment. But the
learned counsel for the respondent befor~ us stated that it i~ not correct to
say that he had conceded any point and that since he could not argue that
point in view of the decision of another Division Bench of the same High
Court.in Khande/wa/ Trader Ako/av. The Ako/a Municipal Council,! AIR
1985 Bombay 218 which was binding on the Bench which heard the.writ
petition and also in view of certain observations of this Court in Burmah
Shell Company v. Belgaum Municipal, [I963f Suppl. 2 SCR 216 and
Hiralal Thakorlal Dalal v. Bra. sh Broch Municipality, [1976] Suppl. SO~
82 he did not press the point. We have therefore, permitted the point to b~
argued in this appeal.
Before we discuss the points in controversy we may state that in the
counter-affidavit filed in the writ petition the respondents have admitted
that the Company was enjoying the current account facility prior to 1.10.1982
and the respondent-Corporation had also given the said facility to the
Company even after lst October, 1982 on their making a cash deposit of
Rs. 7 Lakhs and furnishing a Bank Guarantee for a like sum as s~curity
TATAENGINEERINGCO. v. MUN!CIPALCORPN. [V. RAMASWAMl,J.] 453
~ for grant of that facility. The respondent had also admitted that the ComA
pany had been given permission under Rule I 0 (2) to maintain their own
/.
godown from 12th December, 1982. Broadly stated under the current
__,
account facility granted, no octroi duty is recoverable in cash from the
appellants at the entry octroi naka point. However, the Company was
required to submit a statement of goods imported in Form 5 before the
I 0th of the following month. The officers of the respondent after scrutiny
B
of the s.tatement so filed determine the octroi duty payable thereon and
debit the amount in the current account kept and send a demand notice to
the company. The Company is required to pay the amount to the Corporation within 15 days of the determination of duty.
~
The first submission of Mr. Andharujina, learned counsel for the c
appellants was that the sales were not for consumption or use within the
octroi limits and that the parts were sold to parties outside the octroi limits
and also for consumption or use outside such limits and therefore the
rejection of the claims on the ground that the spare parts were sold within
. the municipal limits and that it amounted to a contravention of Rule 25
(3) (d) of the Rules is illegal. Mr. K.K. Singhvi, the learned counsel for
D
the Corporation on the other hand contended that the meaning of words
"sales therein" in the definition of octroi in the Acts and in Entry 52 of
List II could not be limited to sales of the goods for purposes of consumption or use within the municipal limits.
When an importer wants to export dutiable goods temporarily deE
tained by him in his own godown he shall present an intimation-cumapplication for written permission in Form 11 to the Superintendent of
Octroi to export such goods. Rule 25 (3) (d) states that no such intimation
shall be accepted unless :
"the exporter and the importer of these goods are one and the
F
same person and such articles have not undergone change of
ownership"
The case of the Corporation was . that there was a change in the
ownership of the goods since a sale in law had taken place inside the
J
octroi limits though the purchaser was residing and carrying on business
G
outside the octroi limits and under the sale the goods were intended to be
and in fact exported for the purpose of consumption and use outside the
octroi limits.
Section 127 of the Bombay Provincial Municipal Corporation Act,
· 1949 and the corresponding S. I 05 of the Maharashtra Municipalities Act,
H
1965 authorises the Muncipality to levy "Octroi". Both these Acts define
-
A
B
c
D
E
F
G
H
454
SUPREME COURT REPORTS
(1991) SUPP.2 S.C.R.
octroi as meaning a tax on the entry of goods into the municipal area "for
consumption, use or sale therein". The Maharashtra Municipalities (Octroi)
Rules 1968 made under the Maharashtra Municipalities Act, 1965, provides for ·the levy, collection and refunds of octroi duty on the goods
specified in the schedule thereunder and the procedure for the same. These
Rules were in force in Thane Municipality before Thane was declared as
"City" under the Bombay Municipal Corporations Act LDC of 1949. However these Rules are continued in the Thane Municipal Corporation by
virtue of paragraph 5 of Appendix IV to the Act LDC of 1949.
The legislative entry relating to the constitutional power to levy this
tax is found in List II Entry 52 of the 7ih Schedule to the Constitution
which reads :
"52. Taxes on the entry of goods into a local area for consumption, use or sale therein".
The Bomaby Municipal Boroughs Act, 1925 which was in force
prior to the enactment of the Maharashtra Municipalities Act, 1965 also
contained a similar provision in section 73 enabling the Municipalities
covered by that Act to levy "Octroi on animals or goods or both brought
within the octroi limits for consumption or use therein". This provision
was amended by Amending Act 35 of 1954 by substituting the words "use
or sale" for the words "or use" with effect from May 5, 1954. In other
words before 1954 the word "sale" was not included in the provision of
octroi on goods which the Municipality was authorised to impose. After
the amendment the Municipality could levy octroi on goods brought within
the octroi limits "for consumption, use or sale therein". This provision
came up for consideration ih Bunnah Shell case (supra). Two of the
categories of transactions which were considered in this case related to
transactions under which (l) goods were sold by the Company through its
dealers or by itself and consumed within the octroi limits by persons other
than the Company and (2) goods sold by the Company through its dealers
or by itself inside the octroi limits to other persons but consumed by them
outside the octroi ·limits. The Company contended that the tax .could not
be collected on goods which were merely sold but not consumed inside
the octroi limits. In connection with this contention this Court considered
the meaning of words "consumption, use or sale therein" and observed:
"It is not the immediate person who brings the goods into a
local area who must consume them him-self, the act of consumption may be postponed or may be perfonned by someone
else but so long as the goods have been brought into t11e local
-
-
/.:
TATA ENGINEERING CO. v. MUNICIPAL CORPN. [V. RAMASWAMI, J.] 455
area for consumtion in that sense, no matter by whom, they
A
satisfy the requirements of the Boroughs Act and octroi is
payable".
--
" ..... The goods must be regarded as having been brought in for
purposes of consumption when a person brings them either for
his own use or consumption, or to put· them in the way of B
others in the area, who are to use and consume".
And concluded holding :
"In our opinion, the Company was liable to pay octroi tax on
goods brought into local area (a) to be consumed by itself or
.,,
sold by it to consumers direct and (b) for sale to dealers who in c
I
their turn sold the goods to consumers within the municipal
area irrespective of whether such consumers bought them for
use in the area or outside it. The Company was, however, not
liable to Octroi in resp~ct of goods which it brought into the
local area and which was re-exported".
The ratio is thus not a mere sale inside that attracts octroi but a sale
D
intended for consumption of the goods inside the octroi area though ultimately the person to whom it was sold for consumption does not consume
the goods inside but does the same outside the limit.
After consideration of the judgment in Burmah Shell Company's
case (supra) the Gujarat High Court in one of the cases arising for refund
E
of octroi duty paid, took the view that octroi leviable on goods brought
within the octroi limits 'for consumption, use or sale therein' and that the
word 'sale' could not be given the narrow meaning of a sale for consumption to the ultimate consumer within the octroi limits. Accordingly if the
--
goods were sold within the octroi limits by the importer even if it resulted
in export and coQ.sumption ·was also outside the octroi limit, octroi duty
F
paid is not refundable. This decision came up in appeal before this Court
and the decision of this Court is reported in Hiralal Thakorlal Dalal v.
Brash Broach Municipality, [1976] Suppl. SCR 82. On facts that case
related to a consignment sale and the goods were despatched to destination outside octroi limits for consumption there. A plea for review of the
decision in Bunnah Shell Company's case (supra) was also made in this
G
_.
case. However a Constitution Bench rejected the request for reconsideration and held that the word "sale" in the colloquium of the words "consumption, use or sale therein" means sale for consumption within the
octroi limits. The ratio of these two decisions was considered by the
Bombay High Court in Khandelwal Traders Ako/a 's case (supra), which
was referred to in the Judgment under appeal. It was held in this case also
H
456
SUPREME COURT REPORTS
(1991) SUPP. 2 S.C.R.
A
that where a dealer imports goods within the octroi limits not for ultimate
consumption or sale for consumption within the limits but for the purpose
of export and obtain permission for export he is not liable to pay octroi on
such goods notwithstanding that. in the larger sense· for purposes of export
he sells the goods within the octroi limits, that is to say even where the
situs of the sale could be fixed within the octroi limit. The matter is now
B
put beyond any pale of doubt by the latest decision of this Court in
Municipal Council, Jodhpur v. Mis. Parekh Automobiles Ltd. & Ors.,
[1990] l SCC 367. Rule 13 (4) of the Rajasthan Municipal Octroi Rules,
1962 which was one of the provisions considered in this case provided
that
C
"In cases provided for in sub-rule (3) (that is who is given the
account current facility)-amount of octroi duty payable shall
be based on the total amount· of the octroi as shown by the
entry passes less the total amount or'goods transported outside
the municipal limits as shown by the transport passes:
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F
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Provided that in computing the octr.oi duty payable under subsection (4), the goods transported outside the municipal limits
shall be lessened only if such goods have not been sold within
the municipal limits and if they have been exported out of
such limits within a period of six months from the date of their
import in such limits".
Relying on this provision the municipality in that case contended
that if the sale had taken place within the octroi limits though the sale was
not for consumption or use within the octroi limits, duty was payable and
no refund could be claimed. The learned Single Judge who heard the
matter in the High Court did not permit the importer to raise the question
that the sale took place only outside the octroi limits of Jodhpur and
proceeded on the footing that the sale of product in question took place
within the octroi limits of Jodhpur. He however accepted the contention of
the Indian Oil Corporation (importer) that the sale to the dealer was for
the purpose of export and the dealer did export the goods outside the
octroi limits and that, therefore, even if the sale was said to have been
effected within the octroi limits no octroi was leviable. Since admittedly
the goods had been sold in Jodhpur octroi limits only for their onwards
transmission for use and consumption in Oangia was outside the octroi
limits he held that no octroi duty was payable. This view of the learned
Single Judge was confirmed on appeal by the Division Bench of the High
Court. On appeal this Court confirmed this view and held that the Indian
Oil Corporation (importer) who had the current account facility and gov-
-
·-
I.
TATA ENGINEERING CO. v. MtJNICIPALCORPN. [V. RAMASWAMI,J.] 457
emed by the tenns.ofiule 13 was entitled to go on paying octroi duty "on A
to basis of the goods brought by it within the municipality less the goods
.;..,
tr&isported outside the municipality even where the transport .outside the
municipality may be in pursuance of a sale within the municipality so
}
long as 5uch sale is in pursuance of an intention that the goods should be
conswn~d or used outside the municipal limits".
B
In the present case the sales were to person who were carrying on
business outside the limits of the Corporation and the goods were al~o
intended to be consumed or used outside such limits and in fact the goods
were also exported. The ratio of the decisions above(eferred clearly, therefore;
..
governs this case, even if it were to be assumed that the sale in the general · c
sense took place inside the municipal limits.
However we may state that it was the contention of the learned
counsel for the appellant that the sale in· fact took place outside the municipal limits and in support of this contention he relied on the following
facts among others. The spare parts were consigned by the. Company to D
out station purchasers. The goods were transported by the Company themselves across the octroi limits. The consignment or lorry receipt· mentioned the consignee as self. The bills for collection were sent through
;
~
Bank and the goods were not to be delivered to the consignee until the
payment was made by the consignee through the Bank. Right of disposal
expressly reserved with _the· vendor. On the other hand on behalf of the
E
Corporation it was contended that orders were Df>th received and accepted
in Thane, goods were despatched from Thane and challans were also
made in the name of the buyers and the property in the goods passed
within Thane. The sale had in fact taken place within municipal area. In
fact he further contended that being a question of fact we are not entitled
to go into the same in view of the finding of the High Court. It is not F
necessary for us, ·however, to consider this aspect and we would ~or the
purpose of this case proceed on the assumption that technically the sale in
law bad taken place inside the municipal limits.
Since the goods were sold by the Company to outside purchasers
and the goods under the transactions of sale, were intended to be exported
G
"
and were in fact exported, for consumption or use outside the municipal
,.
limits no octroi duty was leviable and the octroi duty paid on entry into
'j
the municipal limits was, therefore, liable to be refunded. Accordingly the
rejection of the refund claims on the ground that Rule 25 (3) {d) had not
been strictly complied with is illegal and could not be sustained. Such Of
those claims which were rejected only on the grounds of contravetion of H
458
SUPREME COURT REPORTS
[1991] SUPP. 2 S.C.R.
A
Rule 25 (3) (d) shall now be taken up by the respondent and passed for
payment.
In the case of impost of octroi the taxable event is the entry of goods
which are meant to reach an ultimate user or consumer in the area. Mere
physical entry into the octroi limits would not attract levy of octroi. When
B
the goods are. brought in not for consumption within the area but for
temporary detention and eventual export, octroi is not leviable. But in
order to ensure, in such circumstances, that.the goods are exported and to
prevent evasion of octroi on goods consumed inside the octroi limit, Rules
provide for deposit of a certain sum of money or the actual octroi duty
payable subject to a right to get a refund of the same when the goods are
C
exported. When the goods in respect of which octroi was_ paid are exported, the octroi became refundable and that is the very scheme· of the
levy of octroi. The octroiable event in such a case shall be deemed not
have h"appened. Right to refuiid arises because the goods are not consumed inside the area but exported and the tax becomes not leviable. The
rules merely regulate the system on which refunds shall be allowed. The
D procedure prescribed and the need to adhere to the procedure shall have to
be considered in the light of these legal incidence and nature of octroi
duty.
·
E
F
Before we deal with the question whether the Company had not
followed any of the procedure prescribed and the right of the Corporation
to deny refund of octroi on non-compliance with any of those provisions
in the Rules, it is necessary to broadly set out the different types of
procedures prescribed, depending on different purposes of in\ports and
exports, contemplated under the Rules. This may be broadly classified
into five categories, (i) goods imported for consumption, use or sale in the
municipal area, (ii) goods imported not for consumption, use or sale within
the municipality but for immediate export, (iii) goods intended to be
temporarily detained within the municipality in the bonded warehouse
·maintained by the Corporation and eventual export; (iv) goods intended
for temporary detention in the private licensed bonded wharehouse of the
importer and eventual export; and (v) goods imported by any person,
mercantile firm or body which has been permitted by the municipal CorG
poration to keep an current account. In the first case, since octroi is
attracted on arrival of the d_utiable goods at the Octroi Naka the importer
pays the amount of octroi assessed by the octroi officer and takes the
goods inside the municipal limits. In the second case, the importer gives a
declaration-cum application that the goods are not being imported fu the
H
municipal limits for consumption, use or sale but are intended for immediate export outside the octroi limits. He is required to deposit an amount in
TATA ENGINEERING CO. v. MUNICIPALCORPN. [V. RAMASWAMI, J.) 459
accordance with the scale fixed under clause (b) of sul>-i"ule (1) of Rule
A
(5). On such deposit being made a receipt is given in the form prescribed
by the Entrance Naka Inspector and a written permission-c~-transit pass
issued by the Octroi Officer. On arrival of the goods at the exit Naka and
j
on surrender of the-written permission-cum-transit pass the deposit amount
is refunded. In the third category of cases, the importer makes an application to the Octroi officer at the Entrance Naka for a written permission to
B
deposit such goods at the bonded warehouse maintained by the Corporation. The Octroi Officer then makes an entry on the application that the
importer is allowed to proceed with the goods to the bonded warehouse.
The Officer in-charge of the bonded warehouse will receive the goods and
keep them in the bonded warehouse until exported. When the importer
~
wants to export the goods he is required to apply for a written permissionc
cum-export pass in the prescribed form and also deposit an amount equal
to the octroi leviable therein. On such deposit made a written permissioncum-export pass is issued. When the goods are taken out of the municipal
limits the Officer Incharge of the Exit Naka endorses the export pass
certifying the export and the refund of the deposit is claimed thereafter
producing the certificate issued by the Exit Naka Officer. In the fourth
D
category, the importer gives a declaration in Form 4 that the goods are
meant for temporary detention with him at his own warehouse for eventual export. After verification of the particulars furnished in that form
with the invoices and other documents produced he is required to deposit
at the Entry Octroi Naka point itself an amount equal to the amount of full
octroi duty thereon as deposit. A receipt is given by the Octroi Inspector E
stating that the said amount "on account of deposit" has been recovered.
When he wants to export the dutiable goods detained with him he presents
an intimation-cum-application in Form 11 for written permission to export
the goods. He is also required to produce the goods at the Central Octroi
officer along with the application. On satisfaction that all the conditions
prescribed have been fulfilled and after verification of the goods a written F
permission-cum-refund export pass in Form No. 12 is given to the importer. On presentation of these documents the Octroi officer at the Exit
Naka gives a certificate that the goods mentioned therein have passed
octroi limits and with that the refund application is made and refund
obtained.
G
.... _
The instant case falls under the fifth category. The Company has
been permitted by the Municipal Corporation to keep the dutiable goods
in a bonded warehouse of their own with a current account fac~lity. The
rules which were relied on by the Respondent and some of which are said
to have not been complied with by the Company may be set out :
"10.
Maintenance of Bonded Warehouses. -
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c
D
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F
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H
SUPREME COURT REPORTS
(1991] SUPP. 2 S.C.R.
(I)
x
x
x
(2) A Council may permit any importer to maintain a private
Bonded Warehouse for keeping goods which are imported by
such importer for temporary detention and eventual export and
grant a licence to such importer for that purpose subject to the
conditions and restrictions laid down in such licence. A fee
shall be charged for such licence at the rates specified in the
bye-laws relating to the grant of such licence."
"14.Declarations to be made by importer, etc.